China's slow economy is likely to push corporate debt payments

Fear of China's growing debt burden pushing the government early last year to slam the brakes on new loans and crack down on non-traditional forms of lending widely known as shadow banks.

But the weakening economy, exacerbated by ongoing trade wars with the United States, has forced Chinese leaders to launch stimulus measures, which include encouraging banks to borrow more and cut taxes.

Moody & # 39; s Investors Service said in a report Thursday that a statement by the China Banking and Insurance Regulatory Commission that it would continue to support private companies by increasing credit supply is positive for "the fundamentals obedient ". [1[ads1]9659002] But the impact is likely to be limited to weaker companies, Moody says, "because increased credit in the market will mainly flow to issuers with strong credit profiles."

Moody's has also quoted China's economic weakness and trade war as likely to make it harder for businesses to pay their debts.

"We expect debt servicing capability of cyclical sector borrowers to remain vulnerable to a braking economy, particularly vulnerable to potential spikes in trade frictions with the United States," it said in a report earlier this month.

Jackson Wong, Deputy Director of Huarong International Securities in Hong Kong, said the company is optimistic about progress in the war, but warned that the tariff struggle could put Chinese companies on a leash if it ended up raising profitability problems.

"If the trade negotiations or the trade conflicts get worse, I definitely think we'll see the (corporate) debt problem getting worse," Wong told CNBC on Friday.

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